Schwab expands in-house advice, raises RIA referral to $2M

Charles Schwab has expanded its in-house wealth advice operations, raising the asset threshold for referrals to outside registered investment advisers to $2 million, permitting discretionary trading by its advisors and planning to station advisors in 30 office locations by the end of the year. The changes alter how clients may be routed between Schwab and independent RIAs.

Schwab provides custody and trade-clearing for about $5.5 trillion in client assets and lists more than 16,000 RIAs in its advisor network. Over the past year the firm increased the minimum investable assets for third-party referrals from $500,000 to $2 million and broadened services it offers directly to clients.

Executives said the firm will use artificial intelligence to let in-house advisors serve less-affluent clients and to speed advisor workflows and data transfers. Schwab also announced it is allowing its wealth managers to trade on a discretionary basis, a service that previously prompted referrals to outside RIAs.

Jonathan Beatty, head of Schwab’s advisor services, told reporters he has received one email expressing concern from RIAs in the past 12 months and that the issue was resolved within 15 minutes. He pointed to what the firm describes as a large pool of client assets outside the RIA industry, saying there is roughly $37 trillion in the broader marketplace.

Some industry consultants and former Schwab employees say the firm’s expanded in-house capabilities have redirected business that previously went to independent advisers. Tim Welsh, founder of Nexus Strategy and a former Schwab employee, argued that client referrals that once went to independent advisers are now staying with Schwab because the firm can provide more services directly.

Schwab has added programs intended to support RIAs even as it builds its own advice business. The firm created a team of ultra-high-net-worth ambassadors to help RIAs manage banking, trading and investing needs for wealthy clients. Schwab also launched Advisor ProDirect last year, a fee-based service that provides back-office support and a dedicated coach; about 20 firms have joined and Schwab says there is a backlog of advisors seeking to participate.

Executives described AI tools that aim to make data easier to move across systems, automate routine tasks and provide fast answers to operational questions, which they say can benefit both Schwab’s in-house advisors and independent RIAs. Neesha Hathi, head of Wealth and Advice Solutions, said placing advisors in 30 offices will help build local relationships in affluent markets the firm targets.

Schwab’s changes come amid pressure on revenue tied to client cash. Lawsuits over cash sweep arrangements, which move uninvested brokerage cash into bank accounts that earn wholesale returns, have alleged firms kept too much of those returns. Schwab CEO Rick Wurster told investors the company already provides many ways for clients to move money into higher-yielding investments and added, “We couldn’t make it easier.”

The firm continues to emphasize services and programs intended to keep RIAs engaged with its platform. Custody-industry observers note custodians can grow either by adding independent advisers or by expanding direct client relationships; Schwab is pursuing both strategies and industry participants say the balance between in-house services and impartial referrals will shape future RIA relationships.